Nintendo’s Wiining ways

PLAYING TO WIIN: Nintendo and the Video Game Industry, by Daniel Sloan. Wiley, 2011, 256 pp., $24.95 (hardcover)

Ten years ago, tough times had hit Nintendo with shrinking sales and profits, increasing demand for new products and growing pressure from competitors. What hope was there for a comeback from a tradition-bound company that had seemingly lost its way?

For Nintendo, the dire situation facing it in 2001 was just another hiccup in its long rise to the top of the video games world. As the same conditions reappear in 2011, confidence remains high in yet another revolutionary turnaround from the venerable 121-year-old Kyoto institution.

Admiration for Nintendo has been seen in recent works, including Nikkei Business journalist Osamu Inoue’s “Nintendo Magic,” which detailed insights from corporate insiders. While not benefiting from the same access, Daniel Sloan’s “Playing to Wiin: Nintendo and the Video Game Industry’s Greatest Comeback” offers another excellent case study in corporate reinvention.

From a boutique maker of hanafuda playing cards to a global leader in the $30 billion video games industry, Nintendo’s remarkable rise and ability to overcome adversity is an inspiring example amid Japan’s battle to recover from devastating natural disasters.

A former Reuters correspondent in Tokyo, Sloan’s first book shows the benefit of his media experience with its fast pace, catchy headlines and lack of jargon. From its establishment in September 1889 to the launch of its Famicon (Nintendo Entertainment System, or NES) in 1983 and the “game changing” Wii in 2005, readers are given an entertaining introduction to a company seen synonymous with gaming.

Nintendo’s rise is also largely the story of the Kyoto-based Yamauchi family, which has maintained control of the multi-billion dollar games giant through to the present day. Current patriarch, Hiroshi Yamauchi, is portrayed as exercising an iron fist over the company that he took to the pinnacle of success in the 1990s with the NES and portable Game Boy, but with an exacting management style that made him “both loved and loathed.”

Yet despite its origins, Yamauchi broke with tradition in appointing outsider Satoru Iwata as the company’s fourth president in 2002, at a time when Sony had declared victory in the “console wars” and Nintendo was slipping to number three. While an experienced software designer and start-up executive, Iwata had only spent two years with the company when he was made leader at the relatively youthful age of 42.

Nintendo’s reported focus on making gaming fun, rather than developing superior graphics, has helped it build brand loyalty, with a stable of cheery, child-friendly icons including “Donkey Kong,” “Mario,” “Zelda” and the “Pokemon” series.

But its expansion of the gaming audience — a “blue ocean” of uncontested market space — through the all-ages Wii has been a real masterstroke given the industry’s shrinking core market. Code-named “Revolution,” the arrival of the Wii followed the apparent failure of the Nintendo 64 and GameCube consoles, and the rise of competitor products such as the Sony PlayStation and Microsoft’s Xbox.

Iwata is quoted describing the company’s mission as “to lure those who don’t play games and those who have quit playing games, and to break down a wall in a household between players and nonplayers. If that goal is achieved, there is a good chance we can be No. 1.”

With some 73 million Wii and 132 million DS consoles sold during Iwata’s first eight years, and its fitness, pet and brain training games boosting the gaming audience to even retirement homes and sports clubs, Nintendo appears to have succeeded. Yet frustratingly for its admirers, the secrets of Nintendo’s success appear to be as closely guarded as the high walls and barbed wire of the Yamauchi family residence. Despite Iwata’s recent moves to reveal company discussions in its online “Iwata Asks” segments, there are few clues on how Nintendo got its mojo back or what might lie ahead.

Sloan depicts Nintendo as a closed company that will not “admit to having rivals — or even peers — in the industry, or [even be] willing to be in the same building” as its competitors.

But by sticking to its knitting, Nintendo has shown the virtue of a consistent, single-minded approach to business that saw it earn the 2009 BusinessWeek magazine title of “World’s Best Company” and at one stage become Japan’s third most valuable company.

“There is a place for other consoles, and that happens to be the rear-view mirror,” Sony’s Kazuo Hirai is famously quoted saying in 2002, at the height of its PlayStation success. Yet as Microsoft’s J. Allard rebutted, “Objects in the rear-view mirror may be closer than they appear.”

Having suffered two straight years of falling sales and profits, in 2011 Nintendo seems to be at an another turning point. Will the new Wii, anticipated in 2012, turn the tide, or will the company succumb to the challenge mounted by Apple or Microsoft?

Only time will tell, but it should prove an entertaining battle for gaming fans and a company that rarely looks over its shoulder.